The advantages to a wealth tax include raising a significant amount of money, mostly from the wealthy, without dramatically raising income taxes. It would also strengthen incentives to put your money to work earning as high a return as possible, since in addition to inflation, a wealth tax would erode idle assets over time (or require you to subsidize them with your income or more productive investments.)

Disadvantages could include asset flight, but like all taxes, the willingness of taxpayers to tolerate it will depend on the attractiveness of the country as a target for investment/place to live overall. People with large assets that earn a low rate of return, like some farms, might be squeezed.

If you want to play with the numbers, overall American assets are estimated at $80 trillion.

"Reasonable – that is, human – men will always be capable of compromise, but men who have dehumanized themselves by becoming the blind worshipers of an idea or an ideal are fanatics whose devotion to abstractions makes them the enemies of life."-- Alan Watts, "The Way of Zen"

Generally a bad idea due to the capital flight problem, London is full of french people fleeing their version. Also hits old people which politicians are some recitent to do (personally I say screw them)

A better version is a Land value tax as at least thats hard to move out of the coutry

leady wrote:A better version is a Land value tax as at least thats hard to move out of the coutry

Yes, it's harder to move out of the country. No it's not "better" -- it's regressive towards middle class homeowners and would merely be pulling back existing subsidies from agriculture (and hitting industries like livestock, logging, paper...). By the time you wrote the exceptions necessary, I doubt you'd really generate much revenue.

It would also have a terrible effect on conservation, as people would start trying to make all land holdings generate cash flow.

I am opposed to such a tax because it would hit me disproportionately. I have a high net worth because I don't spend money. I don't like anything that punishes me for that.

As for whether it's good for everyone else, I don't know. Doesn't seem like we should discourage people from saving money, and I generally think the tax code should be simplified, but I'm pretty macroeconomically ignorant.

The only real problem without double taxing here would appear to be unrealized capital gains that get transferred to heirs. Presumably this could be fixed by dealing with the loopholes in estate tax/gift tax laws. Somehow that would likely be more manageable politically than trying to institute a tax on all wealth a person has each year. Just the accounting of that would be a real pain.

what is wealth? do the diamond colliers in my drawer count? how are they measured? assets at a bank are relatively easy to control, but i guess people would buy a lot of gold and hide it under their mattresses.

I do think they should make more of an adjustment for housing, while decreasing the general, to account for the wild differences in house prices across the US.

Maybe something like exempting the first X of non-real-estate assets, and exempting the first Y of real-estate assets, where X is the median income of the state and Y is the median single-family-home price of the state. Or some multiple of both.

speising wrote:what is wealth? do the diamond colliers in my drawer count? how are they measured? assets at a bank are relatively easy to control, but i guess people would buy a lot of gold and hide it under their mattresses.

You talk as if this is some weird scheme that no one tried before, while it's actually a pretty standard scheme. It just happens not to be used in the US, where the focus is more on taxing income from wealth. For example, the Dutch implementation is officially a 30% tax on income from capital, but capital is assumed to yield a nominal 4% interest. So it's a 1.2% wealth tax in practice. It comes with all the definitions and trappings and exceptions to deal with questions such as yours, like any effective tax system.

The Dutch system highlights the main difference between a wealth tax and an income-from-wealth tax (for a fixed amount of revenue): a wealth tax is relatively good if you're investments are yielding above-average, an income tax if your investments are below the average. And of course it changes the nature of loopholes, but I don't think either system is clearly less vulnerable to loopholes.

So a wealth tax actually discourages you to store wealth in passive assets since you're still liable to pay even if they do not generate any income.

EDIT: perhaps I am wrong but I presume that EMTP is proposing this tax as a tax increase for rich people, not just as a restructuring of the existing tax burden? It might be useful to separate those aspects. Is the main goal to increase taxes on capital, or to change those taxes towards a wealth tax system while keeping the expected revenue mostly similar?

leady wrote:A better version is a Land value tax as at least thats hard to move out of the coutry

Yes, it's harder to move out of the country. No it's not "better" -- it's regressive towards middle class homeowners and would merely be pulling back existing subsidies from agriculture (and hitting industries like livestock, logging, paper...). By the time you wrote the exceptions necessary, I doubt you'd really generate much revenue.

It would also have a terrible effect on conservation, as people would start trying to make all land holdings generate cash flow.

Would such a tax really be that regressive? Poor people typically own no land, and rich people/organizations tend to own lots of expensive land. Even a billionaire who owns mostly shares in companies would pay a great deal of land tax, indirectly, because those companies in turn own lots of expensive real estate for their factories and mines and offices.

A tax which focuses on land value (not the entire value of the real estate) would encourage people to develop smaller amounts of land more intensely, which seems like a net win for conservation.

Land value tax is kind of a weird thing that might have made sense 100 years ago, but doesn't really make sense today. Land was wealth back in the day, but today most wealth is not in land. Looking at a report from the 2005* (sorry, on my phone, no link for you because I can't get the real link from google to a PDF since Firefox downloads it and google doesn't give a direct URL) there was about $34.7 in real estate, only 10.8 trillion of that is land value, with $7.6 trillion of that in owner occupied housing. This means that if you want to tax land value, most of it will come from the middle class, and elderly people with a high property value in a paid off house, but not much disposable income, will have to sell their house to pay taxes unless you complicate it with exemptions.

That's why I think the solution to wealth inequality is multi-fold:

Lower taxes on the bottom 80% of households.Wealth tax as I stated above0.25% financial transaction tax (which also reduces high frequency trading)Capital gains and dividends treated at normal income, with all income lumped together (wealth tax is deducted from capital gains, but capital gains cannot be negative).Single payer healthcareHigher minimum wageNegative income tax/basic incomeHeavy government investment in education and infrastructure (which raises the demand for labor thus increasing bargaining power of workers)Single Payer Healthcare (Medical bills being the largest cause of bankruptcy)

Thesh wrote:Land value tax is kind of a weird thing that might have made sense 100 years ago, but doesn't really make sense today. Land was wealth back in the day, but today most wealth is not in land. Looking at a report from the 2005* (sorry, on my phone, no link for you because I can't get the real link from google to a PDF since Firefox downloads it and google doesn't give a direct URL) there was about $34.7 in real estate, only 10.8 trillion of that is land value, with $7.6 trillion of that in owner occupied housing. This means that if you want to tax land value, most of it will come from the middle class, and elderly people with a high property value in a paid off house, but not much disposable income, will have to sell their house to pay taxes unless you complicate it with exemptions.

Of course it would no longer be enough to fund the entire government. I mostly like LVT for philosophical "fairness" reasons (land value is, by definition, not the product of anyone's labor, so it ought to be shared) and because it encourages more efficient land use than standard property taxes. With property taxes, people are incentivized to rent out dirt lots for parking. With LVT, people are incentivized to build garages. Land taxes also avoid deadweight loss because the supply curve is vertical: people can't produce less land or sell it in other countries in response to higher taxes.

Regarding your other points, I broadly like them, but why would you simultaneously increase the minimum wage and introduce negative income tax/basic income? One of the big benefits of basic income is that it would allow or encourage people to take on the sort of valuable but low-paying jobs (like working for a nonprofit, or getting an entry-level job during high school for the experience) that minimum wages price out of the market.

speising wrote:what is wealth? do the diamond colliers in my drawer count? how are they measured? assets at a bank are relatively easy to control, but i guess people would buy a lot of gold and hide it under their mattresses.

I think the desire not to count every petty asset is part of the reason it is proposed that the first $100k be exempt.

And people who want to place their assets in something with a rate of return no better than inflation to avoid a 0.25% tax on it are probably not smart enough to hide said assets from the IRS.

Lower taxes on the bottom 80% of households.Wealth tax as I stated above0.25% financial transaction tax (which also reduces high frequency trading)Capital gains and dividends treated at normal income, with all income lumped together (wealth tax is deducted from capital gains, but capital gains cannot be negative).Single payer healthcareHigher minimum wageNegative income tax/basic incomeHeavy government investment in education and infrastructure (which raises the demand for labor thus increasing bargaining power of workers)Single Payer Healthcare (Medical bills being the largest cause of bankruptcy)

I like most of this, but would also propose:

Carbon taxesEnd to farm and fossil fuel subsidiesLimited grazing on public lands, at market pricesTaxes on refined sugar, cornstarch, & red meatWith a significant increase in basic income (paid for by the above) to more than offset higher prices for food, electricity, and fuel for the bottom 80%

Zamfir wrote:EDIT: perhaps I am wrong but I presume that EMTP is proposing this tax as a tax increase for rich people, not just as a restructuring of the existing tax burden? It might be useful to separate those aspects. Is the main goal to increase taxes on capital, or to change those taxes towards a wealth tax system while keeping the expected revenue mostly similar?

I think the primary benefit is to make the tax system more progressive, since as unequally as incomes are distributed, assets are far, far worse.

Some countries, like the United States, need more revenue to balance the budget and accomplish other things. Countries with a larger government already may wish to return some or all of this revenue to the public, perhaps by eliminating the more complex, distortive, difficult-to-administer taxes. Corporate income taxes in the United States, which in theory are very high but in practice are ridden with complex rebates and exemptions, might be a good target. And other countries have their own examples.

"Reasonable – that is, human – men will always be capable of compromise, but men who have dehumanized themselves by becoming the blind worshipers of an idea or an ideal are fanatics whose devotion to abstractions makes them the enemies of life."-- Alan Watts, "The Way of Zen"

lutzj wrote:Regarding your other points, I broadly like them, but why would you simultaneously increase the minimum wage and introduce negative income tax/basic income?

Well, for one a basic income will probably only go to citizens over the age of 18; which means that without a minimum wage, non-citizens and minors get screwed. Another benefit is that in bargaining, the minimum wage gives people some sort of baseline to determine what their wage should be, to prevent an uninformed person from being exploited by an employer. In basic economic theory, yes, a minimum wage is not necessary with a basic income, because the markets will determine the appropriate value of everything; unfortunately, that assumes people are perfectly rational and well informed, which just doesn't occur in the real world. Also, by indexing to productivity you can ensure that as productivity improves, wages grow as well, which is a big problem we have today; productivity gains in the aftermath of the tech boom resulted in stagnating wages and reduced hours and employment. In 2000-2007 we were simultaneously on track for the strongest growth in productivity since the 1960s and the worst economic growth since the 1930s for this very reason.

Also, I think both minimum wage and basic income should be grown gradually over a period of decades to reduce income inequality without shocking the economy, and it works best if you can gradually introduce both.

Thesh wrote:Well, for one a basic income will probably only go to citizens over the age of 18; which means that without a minimum wage, non-citizens and minors get screwed. Another benefit is that in bargaining, the minimum wage gives people some sort of baseline to determine what their wage should be, to prevent an uninformed person from being exploited by an employer. In basic economic theory, yes, a minimum wage is not necessary with a basic income, because the markets will determine the appropriate value of everything; unfortunately, that assumes people are perfectly rational and well informed, which just doesn't occur in the real world.

But how is an arbitrary number any better of a signal than none? If an employer could take advantage of a worker by paying him a lower wage (which I question in the first place), then if that exploitative wage is less than the minimum wage he'll still take as much of an advantage as he can until the minimum wage kicks in. If the exploitative wage is greater than the minimum wage, he'll still take full advantage of it. But if the legitimate wage is less than the minimum wage, the minimum wage still interferes with the market. It doesn't really seem to solve much, it's at least as arbitrary as not having a minimum wage at all.

The main argument for minimum wage laws is to ensure a living wage, but the negative income tax takes care of that. I think that leaves the minimum wage as a solution without a problem.

leady wrote:A better version is a Land value tax as at least thats hard to move out of the coutry

Yes, it's harder to move out of the country. No it's not "better" -- it's regressive towards middle class homeowners and would merely be pulling back existing subsidies from agriculture (and hitting industries like livestock, logging, paper...). By the time you wrote the exceptions necessary, I doubt you'd really generate much revenue.

It would also have a terrible effect on conservation, as people would start trying to make all land holdings generate cash flow.

Yeah, harder to dodge is not quite the same as better. I know a LOT of people that keep forest simply because they can. Land taxes already exist to some degree, and limit that significantly.

And the effect of keeping people from initially becoming landowners would indeed suck.

Adam H wrote:I am opposed to such a tax because it would hit me disproportionately. I have a high net worth because I don't spend money. I don't like anything that punishes me for that.

As for whether it's good for everyone else, I don't know. Doesn't seem like we should discourage people from saving money, and I generally think the tax code should be simplified, but I'm pretty macroeconomically ignorant.

As a rule of thumb, you do not want to heavily incentivize either borrowing or saving over the long term(short term, some counter cyclical actions may be warranted). Saved money is not lost...it's lent out and reinvested and all that jazz.

And income is pretty trackable, but wealth is more difficult. Say you're a comic book collector, and have been your whole life. You suddenly realize that over the years, your most beloved comics, which you do not wish to sell, have greatly appreciated. What then? Consider if you will, the Edgar Church collection. Dude worked in advertising. Not dirt poor, not filthy rich, just a dude. But he bought one issue of every comic when comics were new. Would it be right to force such a person later in life to get rid of the things they love, or pay unreasonable sums of money they don't have? If you even know about it, mind you. Such things are hard for the government to track and verify...and even the owner may not know the true value of their stuff, believing it either higher or lower.

This all gets back to that pesky word "wealth". Is land wealth? Sure. Is money wealth? Well...it usually at least represents wealth. Pretty liquid too. Collectibles? Well, yeah, probably. Not as liquid, though. Wealth is a broad term encompassing many things that don't function quite the same. I'm not thrilled with the concept of treating all identically...and neither am I overjoyed to contemplate a tax code change that adds ridiculous additional complexity. I suspect you need to more precisely target your tax in order to make it reasonable. A tiny fee on market trades? Well, such a thing would certainly avoid many complexities, and at that point, we can discuss if the additional cost in arbitration is worthwhile or not.

bigglesworth wrote:Inheritance tax is already a wealth tax - which gets around the issue of when to value the items that make up that wealth.

Why is an annual wealth tax better than an inheritance tax?

Not that I'm arguing for an annual wealth tax, mind, but I suspect the list of reasons would include it's harder to avoid...death is a one time only event, and is sometimes predictable, sometimes not...so some people manage to skirt it, while some don't, which has sort of an element of unfairness to it. And of course, lifetimes vary, so that's another element of uncertainty. Mostly, the inheritance tax doesn't bring in a great deal of cash, and is hard to enforce. You could improve on that, but it'd come with other tradeoffs, such as taking family farms and so forth. And there's a certain unsavoriness in apparently capitalizing on someone's death/the family misfortunate.

The mega-wealthy captain of industry and steel magnate Andrew Carnegie wrote an essay extolling the duty of rich people to spend their money on projects that benefit the public at large, and explicitly supporting a tax of at least 50% on wealth that was greedily hoarded to the death:

In “The Gospel of Wealth”, Andrew Carnegie wrote:Of all forms of taxation, this seems the wisest. Men who continue hoarding great sums all their lives, the proper use of which for - public ends would work good to the community, should be made to feel that the community, in the form of the state, cannot thus be deprived of its proper share. By taxing estates heavily at death the state marks its condemnation of the selfish millionaire's unworthy life.

It is desirable ;that nations should go much further in this direction. Indeed, it is difficult to set bounds to the share of a rich man's estate which should go at his death to the public through the agency of the state, and by all means such taxes should be graduated, beginning at nothing upon moderate sums to dependents, and increasing rapidly as the amounts swell, until of the millionaire's hoard, as of Shylock's, at least

"_____ The other half Comes to the privy coffer of the state."

This policy would work powerfully to induce the rich man to attend to the administration of wealth during his life, which is the end that society should always have in view, as being that by far most fruitful for the people.

One way to take that is at face value, meaning Andrew Carnegie wanted to encourage philanthropy. And indeed he himself gave away about 90% of his fortune to charitable works before he died. But another possibility is that he did not want to be taxed during life.

If farming is an issue, then a farm inheritance subsidy could be created (there's already plenty of farming subsidies keeping the industry in existence in the UK).

It's not inherently just a farming issue...it's any low-margin industry, where a fairly large amount of wealth is needed to provide a modest income. Some industries are mature, and profits are not huge, while others reap comparatively large dividends. Taxing the latter more heavily usually seems more palatable. People are more eager to tax the investment banker with a fabulous income(even if he spends it all on hookers and blow) than the fellow with a fairly average income(even if he has a large net worth tied up in equipment, land, etc). Farming simply happens to be a fairly easy example for this, as it's pretty common, and forms a well understood mental image.

Zamfir wrote:

And there's a certain unsavoriness in apparently capitalizing on someone's death/the family misfortunate

I guess that's good argument for a 100% estate tax The state carries that unsavory burden so the family doesn't have to.

Eh. Families can get pretty GD nasty post-death when money is involved, sure. I've seen it. Greed can be a terrible thing. I don't imagine that any rate of taxation would fix the underlying issue, though, and those sorts of people would still strive to seek advantage from the death in some way. The state is, of course, little different here. It's also made up of people, and needs money. I'm not overly thrilled about the perverse incentives of rewarding a state for the death of it's civilians.

The fact that this sometimes also rewards families is definitely a cause for concern, though. (I know you're aiming for humor, but there's truth in there too)

Adam H wrote:I am opposed to such a tax because it would hit me disproportionately. I have a high net worth because I don't spend money. I don't like anything that punishes me for that.

I don't know how much money you have, but if it's really high, I'd say you're an excellent target for this sort of tax. Just having money isn't benefiting anyone. Money being spent is far better all-around. If some people won't spend theirs, we can spend it for them.

Also, with regard to capital flight, an exit tax on capital seems prima facie to solve the problem. If you make a fortune in country A and then try to take it away to country B to avoid your civic duty, then country A should just take it.

Sure it is. It's benefitting the person who has the money. It provides peace of mind, partially insulates them from economic risk, health risk, and lets them spend whenever they want without worrying about whether or not they can afford it. It lets them spend money in the future which they could not spend if it were taken from them. "Saving up for something" is exactly this benefit, and sometimes one saves up for old age. This is the essence of self-reliance.

Jose

Order of the Sillies, Honoris Causam - bestowed by charlie_grumbles on NP 859 * OTTscar winner: Wordsmith - bestowed by yappobiscuts and the OTT on NP 1832 * Ecclesiastical Calendar of the Order of the Holy Contradiction * Heartfelt thanks from addams and from me - you really made a difference.

To a limited degree. Saving hundreds of thousands of dollars or more is not for peace of mind; it's hoarding. Using the resources of others isn't self-reliance, regardless of whether you take it early and hold onto it or get it over a more extended period of time.

Saving up long-term, say, for old age, is taking the money out of the economy, only for the later cost of someone not contributing while continuing to consume. Saving for retirement is costly to everyone else, so we have a good reason to either discourage it or charge for it.

P13808 wrote:To a limited degree. Saving hundreds of thousands of dollars or more is not for peace of mind; it's hoarding.

If your entire source of income is cut off and you find yourself disabled, how long do you think a couple of hundred thousand dollars would last you? What kind of life would you have in the interim?

P13808 wrote:Using the resources of others isn't self-reliance, regardless of whether you take it early and hold onto it or get it over a more extended period of time.

How is one's own money "the resources of others"? Other people may want it, other people may make a case that they would benefit from it, but that argument can be made for any possessions. Unless you are advocating the end of personal property, you need to make a stronger case.

The rest of your post is triggering my troll alarm, so I'll just say that saving for retirement is an act of contributing while not consuming, a net plus, and leave it at that.

Jose

Order of the Sillies, Honoris Causam - bestowed by charlie_grumbles on NP 859 * OTTscar winner: Wordsmith - bestowed by yappobiscuts and the OTT on NP 1832 * Ecclesiastical Calendar of the Order of the Holy Contradiction * Heartfelt thanks from addams and from me - you really made a difference.

P13808 wrote:Saving up long-term, say, for old age, is taking the money out of the economy, only for the later cost of someone not contributing while continuing to consume. Saving for retirement is costly to everyone else, so we have a good reason to either discourage it or charge for it.

Wait what? So what do you recommend for retirement then? The alternative that I can see is requiring the government to pay for it which just ends up being hugely more expensive anyways.

Also I'm not sure how saving for retirement is costly for everyone else. Can you elaborate on that?

P13808 wrote:Saving up long-term, say, for old age, is taking the money out of the economy, only for the later cost of someone not contributing while continuing to consume. Saving for retirement is costly to everyone else, so we have a good reason to either discourage it or charge for it.

Wait what? So what do you recommend for retirement then? The alternative that I can see is requiring the government to pay for it which just ends up being hugely more expensive anyways.

Also I'm not sure how saving for retirement is costly for everyone else. Can you elaborate on that?

My guess is that P is 19 and just took Intro Macroeconomics 102.

Ideally, as a country you want a savings rate of 0. Money matches goods produced, less inflation and deflation, etc. People spending helps improve the economy, but you need to have something to back it all up or it's a bubble and it'll burst hard.

I've looked into buying land in Kansas and have discovered that land ownership is much more complicated than most people realize.

In Kansas a typical farm acreage is 180acres (half mile by half mile). Median price on that is around 250k, give or take based on soil content and usable crop land vs usable prairie. That's about $1200 a month or $14,400 a year. I won't go into a lot of the details, but if you aren't a farmer by trade and don't own any of your own farm equipment (because farm equipment is expensive) you rely on "land rents." Land rents net you about $8,000 a year in a decent year. It can vary up slightly but can vary downwards quite a bit if there is a bad drought that year. Suffice to say, you don't make enough money to pay for the mortgage.

As far as I'm concerned the only way to really make money owning a farm is to actually own it outright. Which means either having the farm in your family or being sufficiently well off that you can pay $250k out right. The families who do own their farm outright aren't exactly the richest people either. They might make $24,000 a year from their crops or livestock and that's not even considering whether or not they have their farm equipment paid for.

I've only looked at farm land as an alternative investment vehicle. A lot of the engineers I know do the same. Throw another tax on top of it and it just makes it even less appealing.

A separate issue. How would you handle taxing these assets when they are owned by a bank? The bank isn't just going to eat that cost. They'll pass it along to the person who is purchasing the property. In effect your wealth tax would hit everyone.

trpmb6 wrote:As far as I'm concerned the only way to really make money owning a farm is to actually own it outright. Which means either having the farm in your family or being sufficiently well off that you can pay $250k out right. The families who do own their farm outright aren't exactly the richest people either. They might make $24,000 a year from their crops or livestock and that's not even considering whether or not they have their farm equipment paid for.

Well, it's the people who own it outright who are pushing down prices that it becomes difficult for new players to enter the market. So a tax on the land could even things out and make it a lot easier for other people to have that same opportunity, provided it isn't so high that it's cheaper to have a mortgage (then you can game it).

I suppose it is largely a moot point when it comes to agriculture anyways. I'm pretty sure farms the size I'm talking about receive much more in the form of government benefits than they pay back in. Doesn't really make sense to tax them, only to give it right back to them.

P13808 wrote:To a limited degree. Saving hundreds of thousands of dollars or more is not for peace of mind; it's hoarding.

That really depends on where you live and what your expenses are. If you're planning to retire, hundreds of thousands isn't necessarily all that much - especially if you throw in some unexpected sicknesses, or other emergencies into the mix. What you call hoarding, others call planning ahead.

Using the resources of others isn't self-reliance, regardless of whether you take it early and hold onto it or get it over a more extended period of time.

Keeping your own money is not using the resources of others. The government takes a cut because they can, but aside from that, what someone does with their own money is their business. Whether that means spending it, investing it, or throwing it in a box in the attic.

Saving up long-term, say, for old age, is taking the money out of the economy, only for the later cost of someone not contributing while continuing to consume.

A person who works their entire life contributes to society by working and paying taxes. If they manage to save up a bunch of money in the process, that's great - it means that they can continue contributing to society by spending the money they've saved, rather than have other people pay to support them.

Saving for retirement is costly to everyone else, so we have a good reason to either discourage it or charge for it.

People not saving for retirement means people wholly dependent on public spending, which is less efficient and cost effective, and ultimately ends up costing more and providing less. A very large part of the economic mess we're in right now is due to people not being able (or willing) to be responsible with their own money.

Don't forget that there are some industries that are wholly dependent on retiree's using their services. Tourism for one. Cruise ships for example. Not to mention the fuel to the economy their retirement savings accounts generate. Sure saving money in the attic is probably a negative on the economy. But I highly doubt the number of people doing so is significant enough to make a difference on the GDP of the USA.

Anyone who says saving for retirement is a negative for the economy probably also thinks we should euthanize the elderly for the betterment of society.

Adam H wrote:I am opposed to such a tax because it would hit me disproportionately. I have a high net worth because I don't spend money. I don't like anything that punishes me for that.

I don't know how much money you have, but if it's really high, I'd say you're an excellent target for this sort of tax. Just having money isn't benefiting anyone.

Assuming that someone has his money properly invested, then the saved money is being used to build factories or whatever.

For example: Tesla was only able to build the "Gigafactory" due to billions-of-dollars of shares being sold to the open market. If a "saver" decided to buy Tesla shares, they'd be directly responsible for the creation of the Gigafactory.

That's a huge advantage of the American system. We take money that is sitting still, doing nothing in Bank Accounts... and then divert it to projects that do improve our country. Even money that sits in the bank system ultimately ends up secured in the form of Federal Bonds (ie: allows the US Government to borrow money more cheaply, for various US Government projects).

Only "raw cash" sits still in America, and that is punished by the slight amounts of inflation that is encouraged by the Fed. Indeed, one can argue that the ~2% to 3% inflation rate IS Wealth Taxation... the very economic policy which drives a number of investing behaviors for the betterment of our country.

KnightExemplar wrote:Assuming that someone has his money properly invested, then the saved money is being used to build factories or whatever.

Except that the money is instead being used to tear down factories and farms in order to put up more houses that people can't afford, because the government decided to subsidize home ownership for people who should never be allowed near a contract.

...which raises the question of who it is that should determine how and whether a person may spend their money.

Jose

Order of the Sillies, Honoris Causam - bestowed by charlie_grumbles on NP 859 * OTTscar winner: Wordsmith - bestowed by yappobiscuts and the OTT on NP 1832 * Ecclesiastical Calendar of the Order of the Holy Contradiction * Heartfelt thanks from addams and from me - you really made a difference.

CorruptUser wrote:The person isn't spending their money. The bank is instead the one deciding where the money gets lent to, with the government encouraging it to be spent on homes instead of expanding the economy.

...and this is the depositor's fault? The stated premise is that saving money is the Bad Thing; what you say addresses something else.

Jose

Order of the Sillies, Honoris Causam - bestowed by charlie_grumbles on NP 859 * OTTscar winner: Wordsmith - bestowed by yappobiscuts and the OTT on NP 1832 * Ecclesiastical Calendar of the Order of the Holy Contradiction * Heartfelt thanks from addams and from me - you really made a difference.

CorruptUser wrote:The person isn't spending their money. The bank is instead the one deciding where the money gets lent to, with the government encouraging it to be spent on homes instead of expanding the economy.

CorruptUser wrote:The person isn't spending their money. The bank is instead the one deciding where the money gets lent to, with the government encouraging it to be spent on homes instead of expanding the economy.

...and this is the depositor's fault?

No? Why would you think I'd blame the depositor for that?

Chen wrote:How is building homes not expanding the economy?

Because they don't produce, in much the same way that nuclear subs don't produce. You could make the argument that living in a home results in better grades and health for kids than an apartment, except then you have to calculate the extra gasoline used to travel around a suburb, the increased obesity from being unable to walk anywhere, etc.